2024-07-04 12:36:17
Another problem has been added to the list of challenges facing French President Emmanuel Macron: potential penalties from the European Union for Paris’s failure to rein in its growing budget deficit and public debt.
The rebuke to Paris from Brussels underscored the fragility of France’s financial position at a time of political upheaval, as Marine Le Pen’s far-right National Rally party and the left-wing New Popular Front coalition appear increasingly inclined to form a new government that could weaken Macron’s grip on power.
As reported by Day.Az, this is stated in an article by the American publication The New York Times.
The author of the article emphasizes that the French president led the country into a dead end by calling for early parliamentary elections after his party suffered defeat in the pan-European elections on June 9.
“The EU’s fiscal warning has set the stage for a potential confrontation between Brussels and Paris. Both the National Rally and the New Popular Front have pledged to boost spending on social services at a time when Macron is seeking to cut up to 25 billion euros ($26.9 billion) in public spending this year to shore up the country’s finances.
France’s debt is about 3 trillion euros, or more than 110 percent of gross domestic product, and its budget deficit is 154 billion euros, or 5.5 percent of GDP. The budget crisis comes after Macron spent heavily to support workers and businesses during the coronavirus pandemic.
EU rules generally require member states to maintain budget discipline. States can be fined if their debt exceeds 60% of gross domestic product or if their budget deficit exceeds 3%.
Those rules were suspended after the coronavirus pandemic, when European governments spent heavily to protect their economies. But Brussels reinstated them this year and issued a warning to big-spending countries to close the gap quickly or face a so-called “excessive” deficit procedure that forces indebted governments to negotiate with Brussels or potentially face fines.
France was not the only country to be reprimanded. Six other countries, including Italy and Poland, were found to be in breach of the union’s fiscal rules. All will begin talks with Brussels in July. Romania, which has been warned of a budget deficit in 2020, was also singled out for failing to fix its financial situation.
The censure from Brussels raises the stakes for the party that will take power in France’s parliament after two rounds of voting ending on July 7. The National Rally could win more support than ever, edging out Macron’s centrist party and driving parliament into deadlock.
“Neither outcome is good for fiscal policy,” wrote Mujtaba Rahman, managing director of the Eurasia Group think tank. “A government of the far right or left would actually increase the budget deficit.”
But the political chaos Macron unleashed by calling early elections has spooked investors who see France as an attractive investment destination, and they are now looking at the prospect of instability if Macron is forced to govern with the far-right Jordan Bardella.
Bardella said that if he came to power, his first priority would be to tackle the cost of living crisis that has engulfed French families, primarily by cutting taxes on gas and electricity by “tens of billions” of euros.
Investors fear the far-left New Popular Front coalition will leave fiscal policy to its fate, promising to raise the minimum wage, lower the retirement age to 60 and freeze prices on essential goods including food, energy and fuel. The coalition has said it will reject EU budget rules.
France’s Minister of Economy, Finance, Industrial and Digital Sovereignty Bruno Le Maire said this week that opposition parties “will open the gates to significant public spending at a time when we should be rebuilding our accounts,” the article said.